Dear Green Dot Shareholders,

Transcription

1 2013 ANNUAL REPORT

2 Dear Green Dot Shareholders, With our first sale of an invention we called the igen Prepaid MasterCard Card in May of 2001 at a Rite Aid store in Northern Virginia, a new kind of consumer financial services product was officially launched. Although we didn t know it at the time, that first sale also marked the birth of the general purpose reloadable (GPR) prepaid debit card industry as we know it today. So much has changed over those thirteen plus years-new regulations, new pricing plans, new technology, new competitors and, of course, changes in the product itself and the customers who buy it. But what hasn t changed in all those years is Green Dot s mission to reinvent personal banking for the masses and Green Dot s core belief that treating customers with honesty, fairness and respect is at the cornerstone of long term sustainability and long term success for our business. In 2013, the built-up goodwill for all these years of staying true to our mission and our steadfast dedication to customer-centricity was apparent in that, despite tight risk controls that limited our new customer enrollment and heavy competition from some of the country s largest banks and financial services franchises, Green Dot s products continued to sell well and our company s revenue continued to grow. Not only did our business survive and thrive in 2013 in the face of such headwinds, but we also laid a great deal of important ground work that we believe can provide opportunity and growth going forward. We completed the largest annual expansion of our retail distribution footprint by successfully building new retailer relationships allowing our products to be sold at more than 20,000 new stores nationwide, including our launch into the Financial Service Center channel. We rolled out nine new products at our largest retailer. We successfully launched our state-of-the art mobile checking account, under the brand name GoBank, to the wide praise of both consumers and industry groups. We gained regulatory approval to move the issuance of the Walmart MoneyCard suite of products to our own Green Dot Bank. We continued to strengthen our infrastructure, both in terms of people and sytems, so that we are well positioned to successfully grow and achieve our goals now and into the future. We could not have achieved such a successful year without the hard work, dedication and total commitment from so many talented Green Dot executives and employees. We also appreciate the hard work spent on our behalf by all of our unique stakeholders, including Green Dot business partners, board members, regulators, legislators, consumer advocates and, of course, our customers, with whom we all rely on for our long term success. Finally, we thank you, our investors, for being part of our extended Green Dot family. With best regards, Steve Streit Chairman, President and Chief Executive Officer Forward-Looking Statements We have included in this letter forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of Words such as will, expect, believe and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to, the factors discussed in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on Green Dot s investor relations website at ir.greendot.com and on the SEC website at sec.gov. All information provided in this letter speaks only as of the date of this letter, and Green Dot assumes no obligation to update this information as a result of future events or developments.

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4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission file number GREEN DOT CORPORATION (Exact name of Registrant as specified in its charter) to Delaware (State or other jurisdiction of incorporation or organization) 3465 E. Foothill Blvd. Pasadena, California (Address of principal executive offices, including zip code) (IRS Employer Identification No.) (626) (Registrant's telephone number, including area code) Class A Common Stock, $0.001 par value (Title of each class) Securities registered pursuant to Section 12(b) of the Act: New York Stock Exchange (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( of this chapter) is not contained herein, and will not be contained, to the best of registrant s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes The aggregate market value of the common equity held by non-affiliates of the registrant (assuming for these purposes, but without conceding, that all executive officers, directors and 10% or greater stockholders are "affiliates" of the registrant) as of June 30, 2013, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $635.1 million (based on the closing sale price of the registrant's common stock on that date as reported on the New York Stock Exchange). There were 37,797,987 shares of Class A common stock, par value $.001 per share (which number does not include 6,859,000 shares of Class A common stock issuable upon conversion of Series A Convertible Junior Participating Non-Cumulative Perpetual Preferred Stock) as of January 31, DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant s proxy statement relating to the registrant s 2014 Annual Meeting of Stockholders, to be held on or about May 21, 2014, are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. No No No

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6 GREEN DOT CORPORATION TABLE OF CONTENTS Page PART I. Item 1. Business 1 Item 1A. Risk Factors 13 Item 1B. Unresolved Staff Comments 27 Item 2. Properties 27 Item 3. Legal Proceedings 27 Item 4. Mine Safety Disclosures 27 Item 5. PART II. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data 30 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48 Item 8. Financial Statements and Supplementary Data 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 87 Item 9A. Controls and Procedures 87 Item 9B. Other Information PART III. Item 10. Directors, Executive Officers and Corporate Governance 89 Item 11. Executive Compensation 89 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related 89 Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence 89 Item 14. Principal Auditor Fees and Services 89 PART IV. Item 15. Exhibits, Financial Statement Schedules 90 Signature 91 Exhibit Index 92

7 FORWARD-LOOKING STATEMENTS This report contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the Securities Act ) and the Securities Exchange Act of 1934 (the Exchange Act ). All statements other than statements of historical facts are statements that could be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, seeks, estimates, continues, endeavors, strives, may and assumes, variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part I, Item 1A. Risk Factors, and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason. In this report, unless otherwise specified or the context otherwise requires, Green Dot, we, us, and our refer to Green Dot Corporation and its consolidated subsidiaries, the term GPR cards refers to general purpose reloadable prepaid debit cards, the term prepaid cards refers to prepaid debit cards and the term our cards refers to our Green Dot-branded and co-branded GPR cards. In addition, prepaid financial services refers to GPR cards and associated reload services, a segment of the prepaid card industry.

8 ITEM 1. Business Overview PART I Green Dot Corporation is a technology-centric, pro-consumer bank holding company with a mission to reinvent personal banking for the masses. We believe that we are the largest provider of prepaid debit card products and prepaid card reloading services in the United States, as well as a leader in mobile banking with our GoBank mobile bank account offering. Our products are available to consumers at more than 90,000 retailers nationwide, online and via the leading app stores. Our products and services include Green Dot-branded and co-branded GPR cards, Visabranded gift cards, reload services through our Green Dot Network, using our MoneyPak product or through retailers specially-enabled POS devices, and GoBank, an innovative checking account developed for distribution and use via smartphones and other mobile devices. The combination of our innovative products and services, broad retail distribution and proprietary technology creates powerful network effects, which we believe enhance the value we deliver to our customers, our retail distributors and other participants in our network. We were incorporated in Delaware in October 1999 as Next Estate Communications, Inc. and changed our name to Green Dot Corporation in October We completed our initial public offering of Class A common stock in July In December 2011, we became a bank holding company under the Bank Holding Company Act of 1956, as amended, or the BHC Act, as a result of our acquisition of Bonneville Bancorp, the holding company of Bonneville Bank, a state-chartered Utah bank, which was renamed Green Dot Bank and became a member bank of the Federal Reserve System after the acquisition. In February 2014, we completed the process of transitioning our card issuing program with GE Capital Retail Bank to Green Dot Bank. Upon this transition, all Green Dot-branded and Walmart MoneyCard GPR cards and the GoBank product we offer are issued by Green Dot Bank. We manage our operations and allocate resources as a single operating segment. Financial information regarding our operations, assets and liabilities, including our total operating revenues and net income for the years ended December 31, 2013, 2012, and 2011 and our total assets as of December 31, 2013 and 2012 are included in our consolidated financial statements and related notes in Item 8, Financial Statements and Supplementary Data. Our principal executive offices are located at 3465 East Foothill Boulevard, Pasadena, California 91107, and our telephone number is (626) We maintain a website at We make available free of charge, on or through our website via the Investor Relations section at ir.greendot.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission, or the SEC. References to website addresses in this report are intended to be inactive textual references only, and none of the information contained on our website is part of this report or incorporated in this report by reference. Our Business Model Our business model focuses on three major elements: our consumers; our distribution; and our products and services. Our Consumers We have designed our products and services to appeal primarily to consumers living in households that earn less than $75,000 annually across the following four consumer segments: Never-banked households in which no one has ever had a bank account, Previously-banked households in which at least one member has previously had a bank account, but no one has one currently, Underbanked households in which at least one member currently has a bank account, but that also use non-bank financial service providers to conduct routine transactions like check cashing or bill payment, Fully-banked households that primarily rely on traditional financial services. Based on data from the Federal Deposit Insurance Corporation, or FDIC, the Federal Reserve Bank, the U.S. Census, the Center for Financial Services Innovation and our proprietary data, we believe the addressable portions of these four consumer segments collectively represent a market opportunity of approximately 160 million people in the United States for our products and services. 1

9 Customers in these different segments tend to purchase and use our products for different reasons and in different ways. For example, we believe never-banked consumers use our products as a safe, controlled way to spend cash and as a means to access channels of trade, such as online purchases, where cash cannot be used. We believe previously-banked consumers use our products as a convenient and affordable substitute for a traditional checking account by depositing payroll checks (via direct or in-store deposit) on a Green Dot GPR card and using our products to pay bills, shop online, monitor spending and withdraw cash from ATMs. We believe underbanked consumers use our products in ways similar to those of the never- and previously-banked segments, but additionally view our products as a credit card and debit card substitute. For example, underbanked consumers use our products to make purchases at physical and online merchants, pay bills, make travel arrangements and guarantee reservations. We believe fully-banked consumers use our products as companion products to their bank checking account, segregating funds into separate accounts for a variety of uses. For example, fully-banked consumers may use our cards to shop on the Internet without providing their bank debit card account information online. These consumers also use our products to control spending, designate funds for specific uses, prevent overdrafts in their checking accounts, or load funds into specific accounts, such as a PayPal account. As our new GoBank product gains adoption, we believe that fully-banked consumers will use it in the same way that other fully-banked customers use their bank checking accounts. Our Products and Services Our principal products and services consist of Green Dot-branded GPR cards, co-branded GPR cards and MoneyPak and point-of-sale, or POS, swipe reload transactions facilitated by the Green Dot Network. We also offer our recently-introduced GoBank product and we service general purpose gift cards, which have historically represented only a small percentage of our operating revenues. The Green Dot-branded and Walmart MoneyCard GPR cards and the GoBank product we offer are issued by Green Dot Bank and certain of our smaller co-branded cards are issued by third-party banks. Card balances are FDIC-insured and have either Visa or MasterCard zero liability card protection. Card Products Green Dot-Branded GPR Cards. Our Green Dot-branded GPR cards provide consumers with an affordable and convenient way to manage their money and make payments without undergoing a credit check or possessing a preexisting bank account. GPR cards are designed for general spending purposes, are reloadable for ongoing long-term use, and can be used anywhere their applicable payment network, such as Visa or MasterCard, is accepted. In addition to standard prepaid Visa- or MasterCard-branded GPR cards, we also offer GPR cards positioned for a specific use or market, such as our Online Shopping card, our Prepaid Student card and our Prepaid NASCAR card. To purchase a GPR card in a retail store location, consumers typically select the temporary GPR card from an instore display and pay the cashier a one-time purchase fee plus the initial amount they would like to load onto their card. Consumers then go online or call a toll-free number to register their personal information with us so that we can activate their temporary prepaid card and mail them a personalized GPR card. As explained below, consumers can then reload their personalized GPR cards using a MoneyPak or, at enabled retailers, via an automated point-of-sale process, which we refer to as a POS swipe reload transaction. Funds can also be loaded on the card via direct deposit of various disbursements, such as a customer s payroll check. Our GPR cards are issued as Visa- or MasterCard-branded cards and can be used by consumers at the more than 30 million locations worldwide that accept these brands, including for bill payments, everyday store purchases, online shopping, ATM withdrawals and electronic payments through mobile devices. Our cardholders can conduct ATM transactions at approximately 1.9 million Visa PLUS or 2.1 million MasterCard Cirrus ATMs worldwide, including more than 24,000 MoneyPass fee-free ATMs in all 50 states. We have instituted a simple fee structure that includes a new card fee (if the card is purchased from one of our retail distributors), a monthly maintenance fee (which may be waived based on usage), a cash reload fee and an ATM withdrawal fee for out-of-network ATMs. Most of the features and functions of our cards are provided without surcharges. Our free services include direct deposit reloads, account management, and balance inquiry services via the Internet, telephone and mobile applications. For regulatory compliance, risk management, operational and other reasons, our GPR cards and reload products have certain limitations and restrictions, including but not limited to maximum dollar reload amounts, maximum numbers of reloads in a given time period (e.g., per day), and limitations on uses of our temporary cards versus our permanent personalized cards. 2

10 Co-Branded GPR Cards. We provide co-branded GPR cards on behalf of certain retail distributors and other business entities and affinity groups. Co-branded cards generally bear the trademarks or logos of the retail distributor or business entity or affinity group, and our trademark on the packaging and back of the card. These cards have the same features and characteristics as our Green Dot-branded GPR cards, and are accepted at the same locations. We typically are responsible for managing all aspects of these programs, including strategy, product design, marketing, customer service and operations/compliance. Representative co-branded cards include the Walmart MoneyCard, the NASCAR Prepaid Visa card, the RushCard Live Prepaid Visa card and the Mossy Oak Prepaid MasterCard. GoBank. GoBank is an innovative new checking account product that allows customers to acquire and manage their checking account entirely through a mobile application available on smartphone devices. In June 2013, we made our GoBank product available nationwide. We expect our GoBank product to be distributed through new distribution channels with mobile partners and potentially through our existing distribution channels, including at the store locations of many of our existing retail distributors. Reload Services We generate cash transfer revenues when consumers purchase our reload services. We offer consumers affordable and convenient ways to reload any of our GPR cards and cards from more than 120 third-party prepaid card programs, and to conduct other cash loading transactions through our reload network, using our MoneyPak product or through retailers specially-enabled POS devices. MoneyPak is offered in all of the retail locations where our GPR cards are sold. MoneyPak is a cash reload product that we market on a display like our Green Dot-branded GPR cards. Cash reloads using a MoneyPak involve a two-step process: consumers pay the cashier the desired amount to be added onto the MoneyPak, plus a service fee, generally ranging between $3.00 and $4.95, and then go online or call a tollfree number to submit the unique MoneyPak number and add the funds to a GPR card or other account, such as participating billers or a PayPal account. Alternatively, at many retail locations, consumers can add funds directly to their Green Dot- branded and co-branded cards at the point of sale through an automated POS swipe reload transaction. Unlike a MoneyPak, these POS swipe reload transactions involve a single-step process: consumers pay the cashier the desired amount to be reloaded, plus a service fee, and funds are reloaded onto the GPR card at the point of sale without further action required on the part of the consumer. Our Distribution We achieve broad distribution of our products and services through our retail distributors, the Internet and relationships with other businesses. In addition, our distribution is enhanced by businesses that accept reloads or payments through the Green Dot Network, which we refer to as our network acceptance members, because they encourage their customers to use our prepaid financial services. Retail Distributors. Our prepaid financial services are sold in more than 90,000 retail store locations, including those of major national mass merchandisers and discount retailers, national and regional drug store and convenience store chains, national and regional supermarket chains and regional financial service centers. Our retail distributors include: Type of Distributor Mass merchandise retailers Discount retailers Drug store retailers Convenience store retailers Supermarket retailers Financial service centers Other Representative Distributors Walmart, Kmart, Home Depot Dollar Tree, Dollar General, Family Dollar Walgreens, CVS, Rite Aid 7-Eleven, The Pantry (Kangaroo Express), Circle K Kroger, Blackhawk Network, Inc. RiteCheck, Pay-O-Matic Radio Shack Most of these retailers have been our distributors for several years and all have contracts with us, subject to termination rights, which expire at various dates from 2014 to In general, our agreements with our retail distributors give us the right to provide Green Dot-branded and/or co-branded GPR cards and reload services in their retail locations and require us to share with them by way of commissions the revenues generated by sales of these cards and reload services. We and the retail distributor generally also agree to certain marketing arrangements, such as promotions and advertising. Our operating revenues derived from products and services sold at the store locations of Walmart and our three other largest retail distributors, as a group, represented the following percentages of our total operating revenues: approximately 64% and 22%, respectively, for the year ended December 31, 2013, 64% and 20%, 3

11 respectively, for the year ended December 31, 2012, 61% and 20%, respectively, for the year ended December 31, Our Relationship with Walmart. Walmart is our largest retail distributor. We have been the exclusive provider of Walmart-branded GPR cards sold at Walmart since Walmart initiated its Walmart MoneyCard program in Pursuant to our agreement with Walmart and our subsidiary bank, Green Dot Bank (the card issuing bank), Green Dot designs and delivers the Walmart MoneyCard product and provides all ongoing program support, including network IT, regulatory and legal compliance, website functionality, customer service and loss management. Walmart displays and sells the cards and Green Dot Bank serves as the issuer of the cards and holds the associated FDIC-insured deposits. All Walmart MoneyCard products are reloadable exclusively on the Green Dot Network. Walmart has the right to terminate our agreement prior to its expiration or renewal, but subject to notice periods of varying lengths and for a number of specified reasons, including, among others: our failure to meet agreed-upon service levels, certain changes in control of Green Dot Bank or us, or Green Dot Bank's or our inability or unwillingness to agree to requested pricing changes. In October 2006, we entered into our initial agreements with Walmart and GE Capital Retail Bank, the then-card issuing bank, which set forth the terms and conditions of our relationship with Walmart. In May 2010, the term of the agreement among Green Dot, Walmart and GE Capital Retail Bank was extended through May The parties also agreed to various other changes to the terms of the agreement. In particular, the sales commission percentages that we pay to Walmart for the Walmart MoneyCard program increased significantly in May 2010 and increased by a smaller amount in May In October 2013, we and Walmart expanded the line of cards offered at Walmart, including new card types within the Walmart MoneyCard program as well as GPR cards of other brands, including our own. Green Dot Bank is the card issuing bank for all of these new products. In February 2014, we transitioned our card issuing program with GE Capital Retail Bank to Green Dot Bank. Upon this transition, all Walmart MoneyCards are now issued by Green Dot Bank. Other Channels. An increasing portion of our card sales are generated from our and Walmart's online distribution channels and other non-retail channels. We offer Green Dot-branded cards through our website, and the Walmart MoneyCard through We promote these distribution channels through television and online advertising. Customers who activate their cards through these channels typically receive an unfunded card in the mail and then can reload the card either through a cash reload or a payroll or other direct deposit transaction. Our GoBank product is offered as a mobile application on smartphones and other mobile devices and through our website, Network Acceptance Members. A large number of institutions that offer their own prepaid cards accept funds through our reload network, using our MoneyPak product. We provide reload services to over 120 third-party prepaid card programs, including programs offered by UniRush, H&R Block, and AccountNow. MasterCard s RePower Reload Network also uses the Green Dot Network to facilitate cash reloads for its own member programs. In addition, we provide reload services to other kinds of institutions and their customers. For example, we enable PayPal customers to use a MoneyPak to fund a new or existing PayPal account. Sales and Marketing The primary objectives of our sales and marketing efforts are to educate consumers on the utility of our products and services in order to generate demand, and to instruct consumers on where they may purchase our products and services. We also seek to educate existing customers on the use of our products and services to encourage increased usage and retention of our products. We accomplish these objectives through various types of consumer-oriented marketing and advertising and by expanding our group of retail and other distributors to gain access to additional customers. Marketing to Consumers We market our products to a broad group of consumers, ranging from never-banked to fully-banked consumers. We are focusing our current sales and marketing efforts on acquisition of long-term users of our products, enhancing our brands and image, building market adoption and awareness of our products, improving cardholder retention and increasing card usage. To achieve these objectives, we highlight to consumers the core benefits of our products, which we believe are affordability, access to funds, utility, convenience, transparency and security. Our marketing campaigns for our prepaid financial services involve creating a compelling in-store presence and conducting television advertising, retailer promotions such as circulars, online advertisements, and co-op advertising with select retail distributors. In addition, the marketing strategy for our new GoBank product includes a heavy reliance 4

12 on social media and digital channels such as popular destinations for mobile application downloads, as well as financial sponsorships aimed at creating awareness of the product. We focus on raising brand awareness while educating our customers. We also design, and provide to our retail distributors for use in their stores, innovative packaging and in-store displays that we believe generate consumer interest and differentiate our products from other card products on their racks. Our packaging and displays help ensure that our products are promoted in a consistent, visual manner that is designed to invite consumers to browse and learn about our products, and thus to increase our sales opportunities. We employ a number of strategies to improve cardholder retention and increase card usage. These strategies are based on research we conduct on an ongoing basis to understand consumer behavior and improve consumer loyalty and satisfaction. For example, we use our points of contact with customers (e.g., our website, , interactive voice response system, or IVR, and mobile applications) to educate our customers and promote new card features. We also provide incentives for behaviors, such as cash reloading, establishing payroll direct deposit and making frequent purchases with our cards, that we believe increase cardholder retention. In particular, we believe that our fee waiver program, which eliminates monthly maintenance fees for customers who deposit $1,000 or more to the card or conduct at least 30 transactions with the card during a monthly billing cycle, contributes significantly to cardholder retention within certain of our customer segments. Marketing to Retail Distributors When marketing our prepaid financial services to potential new retail distributors, we highlight several key benefits, including our leading national brand, our in-store presence and merchandising expertise, our cash reload network, the profitability to them of our products and our commitment to national television and other advertising. In addition, we communicate the peripheral benefits of our products, such as their ability to generate additional foot traffic and sales in their stores and higher average purchase amount per transaction. Marketing to Our Network Acceptance Members We market our reload network to a broad range of banks, third-party processors, program managers and others that have uses for our reload network s cash transfer technology. When marketing to potential network acceptance members, we highlight the key benefits of our cash loading network, including the breadth of our distribution capabilities, our leadership position in the industry, the profitability to them of our products, consumer satisfaction owing to the consistency in the user experience and our commitment to national television and other advertising and marketing support. Customer Service We provide customer service for all GPR card and gift card programs that we manage and for GoBank and MoneyPak on a 24-hour per day, 365-day per year basis, primarily through third-party service providers in Guatemala and the Philippines, and also through our staff in the United States. All card activations, reloads, support and lost/stolen inquiries are handled online and through various toll-free numbers at these locations. We also operate our own call center at our headquarters for handling customer and corporate escalations. Customer service is provided in both English and Spanish. Competition We operate in highly competitive and rapidly changing markets, which have become increasingly competitive. Unlike many companies operating in the prepaid financial services industry, we provide simple, low-cost and convenient money management solutions to a broad based of U.S. consumers through the combination of our innovative products and services, broad retail distribution and proprietary technology. Consequently, we compete against the full spectrum of companies across the prepaid financial services industry as well as companies providing traditional banking services. In addition to the direct competitors described below, we compete for access to retail distribution channels and for the attention of consumers at the retail level. Prepaid Card Issuance and Program Management Through Green Dot Bank, we offer Green Dot-branded and several co-branded GPR card programs and Visabranded gift cards. We compete against the full spectrum of providers of GPR cards. We also compete with traditional providers of financial services, such as banks that offer demand deposit accounts and debit card products, and card issuers that offer credit cards, private label retail cards and gift cards. Many of these institutions are substantially larger and have greater resources, larger and more diversified customer bases and greater brand recognition than we do. Many of these companies can also leverage their extensive customer bases and adopt aggressive pricing policies to gain market share. Our primary competitors in the prepaid card issuance and program management market are traditional credit, debit and prepaid card account issuers and prepaid card program managers like American Express, 5

13 First Data, NetSpend, AccountNow, UniRush, Western Union and MoneyGram. In addition, from time to time, new entrants, such as T-Mobile, introduce prepaid card products that could increase competition in this market. Our Green Dot-branded cards also compete with our co-branded GPR cards, such as the Walmart MoneyCard. We believe that the principal competitive factors for the prepaid card issuance and program management market include: breadth of distribution; brand recognition; the ability to reload funds; compliance and regulatory capabilities; enterprise-class and scalable IT; customer support capabilities; and pricing. We believe our products compete favorably on each of these factors. Reload Networks We offer our MoneyPak and POS swipe reload proprietary products, which enable cash loading and transfer services through our Green Dot Network. While we believe our Green Dot Network is the leading reload network for prepaid cards in the United States, a growing number of companies are attempting to establish and grow their own reload networks. In this market, new companies, or alliances among existing companies, may be formed that rapidly achieve a significant market position. Many of these companies are substantially larger than we are and have greater resources, larger and more diversified customer bases and greater name recognition than we do. Our primary competitors in the reload network services market are: Visa, Western Union, MoneyGram, Blackhawk Network, Inc., and Incomm. Visa has broad brand recognition and a large base of merchant acquiring and card issuing banks. Western Union, MoneyGram, Blackhawk Network, Inc., and Incomm each have a national network of retail and/or agent locations. In addition, we compete for consumers and billers with financial institutions that provide their retail customers with billing, payment and funds transfer services. Many of these institutions are substantially larger and have greater resources, larger and more diversified customer bases and greater brand recognition than we do. We believe that the principal competitive factors for reload network services include: the number and quality of retail locations; brand recognition; product and service functionality; number of cardholders and customers using the service; reliability of the service; consistency of the user experience; retail price; enterprise-class and scalable IT; ability to integrate quickly with multiple payment platforms and distributors; customer support capabilities; and compliance and regulatory capabilities. We believe the Green Dot Network competes favorably on each of these factors. Prepaid Card Distribution Our products and services are available to consumers at more than 90,000 retailers nationwide, online and via leading app stores. We compete against the full spectrum of prepaid card distributors and third-party processors that sell competing prepaid card programs through retail and online channels. Many of these institutions are substantially larger and have greater resources, larger and more diversified customer bases and greater brand recognition than we do. Many of these companies can also leverage their extensive customer bases and adopt aggressive pricing policies to gain market share. As new payment methods are developed, we also expect to encounter competition from new 6

14 entrants. Our primary competitors in the prepaid card distribution market are: InComm, Blackhawk Network, Inc., First Data, NetSpend, and American Express. In addition, we face potential competition from Western Union, MoneyGram and a number of retail banks if they enter this market. We believe that the principal competitive factors for the prepaid card distribution market include: brand recognition with consumers and retailers; the ability to easily reload funds; ability to develop and maintain strong relationship with retail distributors; compliance and regulatory capabilities; pricing; and large customer base. We believe our products compete favorably on each of these factors. Personal Banking Services With the nationwide launch of GoBank in June 2013, we have expanded into the market for consumer checking accounts. In this market we compete against a wide range of both traditional and non-traditional banks, including the largest banks. Many of these banks have greater resources, larger and more diversified customer bases and greater brand recognition than we do. Many of these banks also have other assets that could give them an advantage, including broader ranges of product offerings and/or retail branch networks. We believe that our consumer checking account products will be differentiated by their innovative technological features, innovative distribution model, consumerfriendly pricing, and branding. We believe that the principal competitive factors for personal banking services include: brand recognition with consumers and distribution partners; marketing capabilities; product features; ability to develop and maintain strong relationship with distributors; compliance and regulatory capabilities; and pricing. We believe that our GoBank product competes favorably on each of these factors. However, investments in new products such as GoBank are speculative. Accordingly, there can be no assurance that GoBank will be adopted by consumers or otherwise achieve commercial success. Intellectual Property We rely on a combination of patent, trademark and copyright laws and trade secret protection in the United States, as well as confidentiality procedures and contractual provisions, to protect the intellectual property rights related to our products and services. We own several trademarks, including Green Dot, MoneyPak, GoBank, and the Green Dot logo. These assets are essential to our business. Through agreements with our network acceptance members, retail distributors and customers, we authorize and monitor the use of our trademarks in connection with their activities with us. Our patent portfolio currently consists of four patents and nine patent applications. The term of the patents we hold is, on average, twenty years. We feel our patents and applications are essential to our business and help to differentiate our products and services from those of our competitors. The industry in which we compete is characterized by rapidly changing technology, a large number of patents, and frequent claims and related litigation regarding patent and other intellectual property rights. There can be no assurance that our patents and other proprietary rights will not be challenged, invalidated, or circumvented; that others will not assert intellectual property rights to technologies that are relevant to us; or that our rights will give us a competitive advantage. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as the laws of the United States. The risks associated with patents and intellectual property are more fully discussed in Item 1A. Risk Factors, including the risk factors entitled We must adequately protect our brand and the intellectual 7

15 property rights related to our products and services and avoid infringing on the proprietary rights of others, and We must be able to operate and scale our technology effectively to manage any future growth. Regulation Compliance with legal and regulatory requirements is a highly complex and integral part of our day-to-day operations. Our products and services are generally subject to federal, state and local laws and regulations, including: anti-money laundering laws; money transfer and payment instrument licensing regulations; escheatment laws; privacy and information safeguard laws; banking regulations; and consumer protection laws. These laws are often evolving and sometimes ambiguous or inconsistent, and the extent to which they apply to us, our subsidiary bank or the banks that issue our cards, our retail distributors, our network acceptance members or our third-party processors is at times unclear. Any failure to comply with applicable law either by us or by the card issuing banks, retail distributors, network acceptance members or third-party processors, over which we have limited legal and practical control could result in restrictions on our ability to provide our products and services, as well as the imposition of civil fines and criminal penalties and the suspension or revocation of a license or registration required to sell our products and services. We continually monitor and enhance our compliance program to stay current with the most recent legal and regulatory changes. We also continue to implement policies and programs and to adapt our business practices and strategies to help us comply with current legal standards, as well as with new and changing legal requirements affecting particular services or the conduct of our business generally. These programs include dedicated compliance personnel and training and monitoring programs, as well as support and guidance to our retail distributors and network acceptance members on compliance programs. Anti-Money Laundering Laws Our products and services are generally subject to federal anti-money laundering laws, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, and similar state laws. On an ongoing basis, these laws require us, among other things, to: report large cash transactions and suspicious activity; screen transactions against the U.S. government s watch-lists, such as the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control; prevent the processing of transactions to or from certain countries, individuals, nationals and entities; identify the dollar amounts loaded or transferred at any one time or over specified periods of time, which requires the aggregation of information over multiple transactions; gather and, in certain circumstances, report customer information; comply with consumer disclosure requirements; and register or obtain licenses with state and federal agencies in the United States and seek registration of our retail distributors and network acceptance members when necessary. Anti-money laundering regulations are constantly evolving. We continuously monitor our compliance with antimoney laundering regulations and implement policies and procedures in order to comply with the most current legal requirements. We cannot predict how these future regulations might affect us. Complying with future regulation could be expensive or require us to change the way we operate our business. We are registered with the Financial Crimes Enforcement Network, or FinCEN, as a money services business. As a result of being so registered, we have established anti-money laundering compliance programs that include: (i) internal policies and controls; (ii) designation of a compliance officer; (iii) ongoing employee training and (iv) an independent review function. We have developed and implemented compliance programs comprised of policies, procedures, systems and internal controls to monitor and address various legal requirements and developments. To assist in managing and monitoring money laundering risks, we continue to enhance our anti-money laundering 8

16 compliance program. We offer our services largely through our retail distributor and network acceptance member relationships. We have developed an anti-money laundering training manual and a program to assist in educating our retail distributors on applicable anti-money laundering laws and regulations. Money Transmitter Licensing Regulations We are subject to money transmitter licensing regulations. We have obtained licenses to operate as a money transmitter in 39 states, Puerto Rico and Washington, D.C. The remaining U.S. jurisdictions either do not currently regulate money transmitters or have rendered a regulatory determination or a legal interpretation that the money services laws of that jurisdiction do not require us to obtain a license in connection with the conduct of our business. As a licensee, we are subject to certain restrictions and requirements, including reporting, net worth and surety bonding requirements and requirements for regulatory approval of controlling stockholders, agent locations and consumer forms and disclosures. We are also subject to inspection by the regulators in the jurisdictions in which we are licensed, many of which conduct regular examinations. In addition, we must at all times maintain permissible investments in an amount equivalent to all outstanding payment obligations. The definition and interpretation of outstanding payment obligations may vary by jurisdiction and, in some cases, may include the balances on our card products even though technically, the outstanding payment obligations represented by the balances on our card products are liabilities of the issuing bank. Accordingly, it is possible that some states will require us to maintain permissible investments in an amount equal to the outstanding payment obligations of the bank that issues our cards. The types of securities that are considered permissible investments vary from state to state, but generally include cash and cash equivalents, U.S. government securities and other highly rated debt instruments. Escheatment Laws Unclaimed property laws of every U.S. jurisdiction require that we track certain information on our card products and services and that, if customer funds are unclaimed at the end of an applicable statutory abandonment period, the proceeds of the unclaimed property be remitted to the appropriate jurisdiction. We have agreed with the banks that issue our cards to manage escheatment law compliance with respect to our card products and services and have an ongoing program to comply with those laws. Statutory abandonment periods applicable to our card products and services typically range from three to seven years. Privacy and Information Safeguard Laws In the ordinary course of our business, we collect certain types of data, which subjects us to certain privacy and information security laws in the United States, including, for example, the Gramm-Leach-Bliley Act of 1999, or the GLB Act, and other laws or rules designed to regulate consumer information and mitigate identity theft. We are also subject to privacy laws of various states. These state and federal laws impose obligations with respect to the collection, processing, storage, disposal, use and disclosure of personal information, and require that financial institutions have in place policies regarding information privacy and security. In addition, under federal and certain state financial privacy laws, we must provide notice to consumers of our policies and practices for sharing nonpublic information with third parties, provide advance notice of any changes to our policies and, with limited exceptions, give consumers the right to prevent use of their nonpublic personal information and disclosure of it to unaffiliated third parties. Certain state laws may, in some circumstances, require us to notify affected individuals of security breaches of computer databases that contain their personal information. These laws may also require us to notify state law enforcement, regulators or consumer reporting agencies in the event of a data breach, as well as businesses and governmental agencies that own data. In order to comply with the privacy and information safeguard laws, we have confidentiality/information security standards and procedures in place for our business activities and with network acceptance members and our third-party vendors and service providers. Privacy and information security laws evolve regularly, requiring us to adjust our compliance program on an ongoing basis and presenting compliance challenges. Banking Regulations We became a bank holding company in December 2011, as a result of our acquisition of Bonneville Bancorp, the holding company of Bonneville Bank, a state-chartered Utah bank, which was renamed Green Dot Bank after the acquisition. We and our subsidiary bank are extensively regulated under federal and state laws, which, in general, results in increased compliance costs and other expenses, as we and our subsidiary bank are required to undergo regular on-site examinations and to comply with additional reporting requirements. As a bank holding company, we are subject to the supervision of, and inspection by, the Federal Reserve Board and are subject to certain regulations which, among other things, restrict our business and the activities in which we may engage. Our existing business activities and currently proposed business activities are not materially restricted by these regulations. 9